My thoughts on “Turf wars hobble China’s financial markets”
Quotations extracted from “Turf wars hobble China’s financial markets” – By Alan Wheatley, China Economics Editor, Guardian.co.uk
“It was no surprise when China Investment Corp (CIC), the
$200 billion sovereign wealth fund set up last September,
bought into U.S. private equity giant Blackstone and investment
bank Morgan Stanley. CIC’s mandate, after all, is to take more
risk to earn higher returns on a chunk of China’s vast
reserves.”
It was a surprise to me, because I would have thought if CIC’s mandate was earning higher returns, the USA economy would not be the best place to seek returns given the current economic outlook for the USA is indicating a near-term recession with ongoing deflationary and inflationary pressures conspiring to flatten growth and devalue the USD relative to the Yuan.
The most interesting extracts with implications for Australia:
“Financial market innovation requires clear rules, and
China’s in desperate need of financial market innovation,” said
Michael Pettis, a finance professor at Peking University.
“What was a surprise was when the State Administration of
Foreign Exchange (SAFE), an arm of the central bank that
separately manages $1.68 trillion of China’s reserves, showed
up on the share registers of a trio of Australian banks and of
Western oil majors Total SA
The need for greater financial market innovation in China could provide scope for that same trio of Australian banks (and other Australian financial institutions) to take reciprocal positions in the Chinese financial marketplace, subject of course to the provision of satisfactory market-opening measures being incorporated into the pending Australia-China FTA (Free Trade Agreement). There is a promising indication that this could occur, with some provisions being incorporated into the recently gazetted New Zealand-China FTA.
Most (un?)amusing extracts:
Word has it in Beijing financial circles that CIC is furious.”
“owing to a communications
gaffe, the first Premier Wen Jiabao knew of CIC’s (China Investment Corporation) $5 billion
stake in Morgan Stanley was when he heard about it on the
television news.”
Not Happy Wen Jiabao!
China’s financial market continues to be the most dynamic, expansionary capital market in these opening stages of the 21st century, rising in capitalisation and influence just as the USA capital markets undergo the paroxism of spasmodic contractions. Sub-Prime is far from over in the USA; more pain is yet to come.
But ultimately the giant global demand for energy, particularly acute in China, which is currently down to a very slender 12 days reserves of coal, will prove to be the limiting factor for growth in every economic jurisdiction.
That’s why economists need to spend more time talking to ecologists. Economics somehow pretends there is no imminent catastrophe decline in energy availability just as demand in China and India is skyrocketing, whereas that is the physical reality facing the globe.
May you live in interesting times, indeed.
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